If the prices of all goods and services rose, but the quantity produced remained unchanged, what would happen to nominal and real GDP?
A) Nominal and real GDP would both rise.
B) Nominal and real GDP would both be unchanged.
C) Real GDP would rise, but nominal GDP would be unchanged.
D) Nominal GDP would rise, but real GDP would be unchanged.

Question

Quizplus · Accepted Answer

Nominal GDP is calculated using current prices, so if prices rise, nominal GDP would also rise, even if the quantity produced remains constant. Real GDP, on the other hand, adjusts for inflation by using a constant base year price, so if prices rise but the quantity produced stays the same, real GDP would be unchanged.

If the Prices of All Goods and Services Rose, but the Quantity